KATHMANDU, Aug 1: Nepal Rastra Bank (NRB) has prepared a draft framework for a "Regulatory Sandbox" to foster innovation in financial services. This initiative will allow for the controlled testing of new technologies and innovative financial products and services in a supervised environment.
The sandbox aims to promote responsible innovation while strengthening financial inclusion efforts, according to NRB. The central bank is currently seeking public feedback on the draft.
The purpose of establishing a Regulatory Sandbox is to create a regulatory environment that supports the development and implementation of tech-driven innovations in the financial sector. It provides a controlled and monitored space where participating entities can test their products, services, or business models under the guidance and conditions set by NRB.
According to the draft, the sandbox will allow innovators to conduct evidence-based evaluations of their innovations before launching them commercially. The goal is to improve access, usage, and quality of digital financial services, while ensuring the safety and accountability of new financial products.
The framework also aims to enable direct testing of fintech innovations in real-world settings without compromising consumer safety or financial system stability. It promotes collaboration between traditional financial service providers and fintech companies.
Key objectives include bringing emerging technologies within the regulatory scope, ensuring risk management, facilitating regulatory dialogue around new technologies, and informing policy and regulatory reforms in the financial sector.
The sandbox will particularly support fintech innovators, but any entity—including traditional financial institutions—that has a ready-to-test product, service, or model may participate.
Activities eligible for testing must fall within the legal and regulatory framework of Nepal, allowing NRB to maintain oversight. Eligible participants include banks and financial institutions, payment system operators, payment service providers, remittance companies, and fintech firms authorized to innovate under existing laws.
The initiative is also expected to enhance the regulatory capacity to monitor new technologies while ensuring that their introduction does not pose systemic risks to the financial ecosystem.